[Letterhead] [Date] ATTORNEY-CLIENT PRIVILEGED DOCUMENT Re: , LLC Dear __________: Enclosed are copies of the Articles of Organization (to be filed after you have signed two originals) and a draft of an Operating Agreement for the limited liability company (LLC). You should read each document in detail so that you understand each provision of the documents. If there are provisions that do not apply to your situation or are in conflict with your desires, you should contact me immediately. Since each member who invests money or property in the LLC may have conflicting interests with other members, separate counsel may be employed by each member to review the provisions of the enclosed documents. You have or will receive a separate letter from me regarding this issue. I will be representing the LLC and not the individual members or organizers of the LLC. It is important to employ a competent certified public accountant to advise you concerning many matters and to help you establish an accounting system and to provide for the filing of the necessary tax-related documents. Your accountant should advise you about most of the following things. You may also need to employ other specialists to assist you, and I will be happy to work with your accountant and others to achieve your objectives. It is important to remember to properly designate the LLC as the entity which enters into any contract or transaction. Use of the full legal name of the LLC must be employed on all checks, contracts, invoices or other documents. The manager who signs such documents should specifically designate that the document is executed in a representative fashion as "manager" of the LLC. The words "limited liability company" must be a part of the official name of the LLC. The following is a brief, nonexhaustive list of things to do and consider immediately: 1. An LLC is designed to be taxed for income tax purposes as a partnership and not a corporation. The IRS has recently adopted a “Check The Box” procedure for declaration of how an entity will be taxed (either as a partnership or as an association). You should review this issue with competent income tax counsel and determine whether a definitive private letter ruling should be requested. Taxation of a limited liability company member for self employment tax on income of the LLC will be imposed if the LLC is managed by the members and not by a manager. A manager may be required to pay self employment tax for fees earned by the manager for the manager’s services. 2. The member ownership interest in the LLC may constitute a "security" under both federal and Colorado securities law. Unless a security or the transfer of a security is exempt, there are federal and state security registration and filing requirements. The antifraud provisions of federal and state law could apply whether or not registration is required. You should employ counsel who specializes in securities law regarding registration requirements. 3. A determination must be made as to what assets and liabilities are to be turned over to the LLC. You may contribute tangible property or intangible property. Work to be performed and promissory notes can be contributed, but a specific written agreement should be prepared to document the transaction. The tax effect of each transfer should be discussed with your accountant. Transfer of real estate or assignment of a contract to acquire real estate or a business to the LLC is by deed or assignment of contract, and if you need me to do transfers of assets to the LLC, please let me know. 4. You should immediately file for an employer identification number from the Internal Revenue Service (Form SS4), and you should also file for a _______ State Sales Tax License and State employer number. I can do this for you if you wish. 5. You should establish an account for Workmen's Compensation and determine which insurance carrier will provide coverage for you if the LLC will have employees. 6. You should establish your unemployment compensation account with the State of ___________. There is a fee to be paid to the State for unemployment which is based upon wages if the LLC has employees. 7. If you want to have employees for the LLC, including yourself, you should consider entering into an employment agreement between any employee and the LLC. The agreement would provide for salary and non-salary related compensation and describe the activities which the LLC desires to have each employee perform. You should discuss this matter with your accountant so that the proper matters can be covered in the agreement. 8. You have selected or will select a bank for your checking and other accounts. You will be required to open an account in the name of the LLC and will be required to furnish the employer identification number from the Internal Revenue Service. You will be asked to execute a resolution form in substantially a form prepared by the bank. 9. To the extent there are any outstanding accounts payable by your current business that may be transferred to the LLC, you should notify the holders of those accounts payable (including utilities) that you intend to have the LLC commence taking over the business as of a particular date. In the event the LLC is to assume any then existing liabilities, you should discuss that matter first with your accountant. 10. You should notify all of your insurance agents that may carry any type of coverage that the LLC will commence doing business on your intended date to do so. You should make a survey of all coverages which you have and determine that you have the property coverage both for the LLC and for each of the managers and owners individually. 11. You may have plans for the LLC to develop accident and health insurance plans, wage continuation plans, medical reimbursement plans, group term life insurance plans, death benefit plans or pension and profitshaarin plans. If you intend to pursue any of these, I suggest that you discuss the matter both with your accountant and me. 12. If anyone intends to furnish a car for the benefit of the LLC, it will be necessary to discuss this matter with your accountant prior to doing so. 13. Personal property tax to each ___________ county where assets of the LLC are located will be due by the LLC for the years of its operation. If you intend to transfer the equipment subject to the tax to the LLC, the county assessor's office will need to be notified of the change in ownership. 14. You should determine the method of issuing formal announcements of the change in name and ownership and include your letterheads, statements, professional cards, telephone listing, directory listings, supplier listing and customer listing. 15. The LLC may have interstate operations. Registration to do business in other states in which the LLC does business may be necessary. Not all (but most) states recognize LLCs as a separate type of entity, and we should discuss what other states you must or may register in and how to accomplish such registration. If the Operating Agreement appears satisfactory in its current form, all of the LLC members should sign the Agreement (both at the end of the Agreement and on Exhibit "A"). I would like to have a copy of the signed Agreement in my file, so could you send a copy after it is signed. If you have any other questions, please do not hesitate to contact me. Sincerely, __________________